Update from North America

Dollar Steady, Euro Soft Ahead of ECB

2 min read

The U.S. Dollar is broadly stronger against G10 peers as U.S. Treasury yields rise, with the 10-year note at its highest level since October 2023.

This increase in yields is primarily being driven by higher oil prices, which are stoking inflation expectations. Brent Crude trades near $102 per barrel and WTI Crude above $97 per barrel this morning as a result of the latest escalation in the Middle East. Iranian officials stated overnight that they have no intention of backing down from the U.S. despite an ongoing naval blockade and attacks on its oil tankers, and that they are prepared to escalate counterstrikes should the U.S. continue to attack Iranian territory and infrastructure.

On the U.S. data front Traders are looking to Initial Jobless Claims for the week ending September 5th, which are expected to come in at 205k, down slightly from 206k for the prior week. Producer Price Index (PPI) numbers for the month of August are also due to be released, with the headline year-over-year final demand figure expected to print at 5.3%, up more than half a percent from the previous month’s figure of 4.7%. Both releases are due at 8:30am. Consumer Price Index (CPI) numbers for the month of August are due tomorrow morning and are of particular interest as a hotter-than-expected print could help cement rate hike expectations for the Federal Reserve at their policy meeting next week.

What to Watch This Week…

The complete Economic Calendar can be found here.

EUR

The Euro is down against the Buck ahead of the European Central Bank’s policy meeting at 8:15 this morning. The ECB is widely expected to hike interest rates by 25 bps to 2.5%, but this will still have the Eurozone lagging behind the U.S. with regard to interest rates by more than 1%. Due to the fact that the hike is essentially guaranteed, focus is now on what forward guidance the ECB will provide. The Euro is vulnerable to a sell off should ECB President Christine Lagarde come out dovish and not signal a willingness for a third interest rate hike later in the year. The widening spread between U.S. and German 2-year yields is adding further pressure for the common currency.